In the period spanning from June 30, 2022, to June 30, 2023, a year-over-year analysis of the financial markets reveals significant shifts.

While stock markets displayed improvements, bond markets experienced a subdued trend. Industry leaders and economic experts have closely monitored these market dynamics.

Stock Market Trends:

Over the year, between June 2022 and June 2023, both the S&P 500 and the Dow demonstrated noteworthy gains. The S&P 500 observed a surge of 17.5 per cent, while the Dow experienced an 11.8 per centincrease. This growth trajectory signifies the positive momentum experienced by these stock market indices.

Bond Market Trends:

Conversely, the bond market experienced varying trends. Notably, the 10-year U.S. Treasury bond exhibited an upward shift in yield, reaching 3.8 per cent by June 30, 2023. This marks an increase of over 80 basis points from its 3.0 per cent yield level as of June 30, 2022. A similar trend was observed for the 2-year U.S. Treasury bond, which yielded 4.9% by June 30, 2023—approximately 200 basis points higher than its 2.9 per cent yield level as of June 30, 2022.

First Six Months of 2023:

The year 2023 has seen continued market dynamics. During the first six months of the year, the S&P 500 grew by 16 per cent, the Dow by 4.0 per cent, and the European Stoxx 600 by 8.0 per cent. However, sovereign debt yields displayed a modest rise. As of June 30, 2023, the 2-year U.S. Treasury bond yielded 4.9 per cent, the 10-year bond stood at 3.8 per cent, and the 30-year bond registered 3.8 per cent. This uptrend can be attributed to an acceleration of interest rate hikes initiated by the U.S. Federal Reserve—two additional 25 basis point hikes were implemented during the year’s second quarter.

Local Market Insights:

Within the local context, benchmark interest rates exhibited a range from 9.98 per cent for 30-day BOJ CDs to 7.89 per cent for the 180-day T-Bill. Bank of Jamaica’s policy interest rate remained steady at 7.0 per cent. The year-over-year (YOY) inflation rate decelerated from 9.4 per cent in December 2022 to 6.3 per cent in June 2023, slightly above the BOJ’s maximum target of 6.0 per cent. The JMD/USD exchange rate, as of June 30, 2023, stood at J$154.62, reflecting a year-to-date depreciation of 1.7 per cent. Concurrently, the Jamaica Stock Exchange declined by 6.7 per cent year-to-date.

Outlook:

Market conditions align with management’s expectations, with the anticipation of nearing the peak of the U.S. hiking cycle. A window of opportunity presents itself for capitalising on undervalued fixed-income assets. The stage is for economic growth, strategic investments, and business expansion.

Sterling Investments Limited’s Financial Performance Overview: Highlights:

● Total revenue increased 105 per cent year-on-year.

● Net profit surged by 11.6x.

● Management’s market predictions continue to align.

● Consistent generation of steady income from the US$ investment portfolio.

● Recovering asset prices contributed to portfolio gains.

Income Statement:

For the first half of 2023 (January – June), total revenue escalated by 105 per cent, from J$49.4 million in 2022 to J$101.3 million in 2023. This increase was primarily driven by a J$29 million foreign exchange gain in 2023, in contrast to a J$32.6 million foreign exchange loss recorded in the first half of 2022. The Jamaican/United States dollar exchange rate movement contributed to this variance.

Total expenses declined from J$42.4 million in the first half of 2022 to J$18.7 million in the first half of 2023, attributed to the improved value of structured notes in the company’s portfolio. Notably, interest expense increased from J$6.9 million to J$13.4 million, reflecting the elevated margin rates on the company’s notes payable.

Higher revenue and reduced expenses culminated in a substantial net profit increase, rising from J$7.1 million in the first half of 2022 to J$83 million in the first half of 2023.